Letter from Rep. Billy Tauzin (R-LA) and Rep. James Greenwood (R-PA) to Sam Palmisano, CEO of IBM. Re: Waste, fraud and abuse in the FCC's e-rate program. Date: July 14, 2003. Source: House Commerce Committee.
		Tauzin		Greenwood

July 14, 2003

Mr. Samuel J. Palmisano
Chief Executive Officer
IBM Corporation
1133 Westchester Avenue
White Plains, New York 10604

Dear Mr. Palmisano:

As you may know, the Committee on Energy and Commerce, which has jurisdiction over telecommunications issues and the Federal Communications Commission (FCC), currently is investigating the potential for waste, fraud, and abuse in the E-rate program - the mechanism of the Universal Services Fund (USF) that subsidizes the deployment of telecommunications services to schools and public libraries.

In the course of our work, we have been examining documents produced by both the FCC and the Universal Service Administrative Company (USAC), which administers the E-rate program for the FCC. We also have received preliminary information from certain vendors and applicants participating in the program, and have conducted interviews with relevant individuals. Based on our review to date, we have identified your company as having significant involvement in the E-rate program, and thus are writing to you today to seek additional information to assist our review.

Accordingly, we request that, pursuant to Rules X and XI of the U.S. House of Representatives, you provide the following information requested below on or before Monday, July 28, 2003:

1.  Explain your company's organization and operations that pertain to the E-rate program, including a description of key company officers and employees, their principal duties and areas of expertise, and the location of their offices. Please specify those offices or individuals primarily responsible for business related to the E-rate program.

2.  A list of all E-rate clients and, for each such client, explain the types of services performed and the amount of money received for such services during each year of the relevant time period.  Provide all contracts and agreements relating to such services.

3.  All records relating to the marketing or promotion of your E-rate services, including but not limited to (i) internal records relating to plans, policies, or practices to increase or improve your E-rate business; and (ii) records relating to communications with clients or potential clients regarding increasing or maximizing E-rate funding.

4.  All records relating to the potential eligibility or non-eligibility of services or equipment under the E-rate program.

5.  All records relating to National School Lunch Program eligibility as a mechanism to determine E-rate discounts, including but not limited to records relating to ways to increase or improve the discount eligibility of applicants' schools.

6.  All records relating to the bidding process for E-rate-funded services or equipment.

7.  All records relating to the provision of assistance by your company to any E-rate applicant regarding development of its Form 470 or Form 471 submission to USAC.

8.  Has any employee of your company ever received any request from a potential E-rate applicant, or ever made any offer, promise, commitment or agreement, whether written or oral, to or with any potential E-rate applicant, under which your company would provide, either directly or indirectly through any third party, financial assistance to such applicant to help it meet its required share of E-rate-funded costs, including but not limited to any request or offer of free or reduced cost services or equipment or assistance? If so, please describe such requests or commitments.

9.  All records relating to any request, offer, promise, commitment or agreement, whether written or oral, between you and any potential E-rate applicant, under which your company would provide, either directly or indirectly through any third party, financial assistance to such applicant to help it meet its required share of E-rate-funded costs, including but not limited to any request or offer of free or reduced cost services or equipment or assistance.

10.  All records relating to E-rate-related services provided to IBM (or any of IBM's E-rate clients or potential clients) by Alpha Communications, Inc. (Alpha), including but not limited to (i) all records of communications between or among IBM, Alpha, and IBM E-rate clients or potential clients with respect to such services; and (ii) all contracts or statements of work agreed to between IBM and Alpha.

Please note that, for the purpose of responding to these requests, the applicable time period is January 1, 1998, to the present, unless noted otherwise. The terms "records," "relating," and "regarding" should be interpreted in accordance with the attachment to this letter.

Thank you for your prompt attention to this request. If you have any questions, please contact Peter Spencer of the Majority professional staff at (202) 225-2927.

Sincerely,

W.J. "Billy" Tauzin
Chairman

James C. Greenwood, Chairman
Subcommittee on Oversight & Investigations

cc:    The Honorable John D. Dingell, Ranking Member
        The Honorable Peter Deutsch, Ranking Member
        Subcommittee on Oversight & Investigations